Should You Ever Make a Counter Offer to an Employee?

counter offer to an employee

It’s no secret that competition for experienced employees is heating up. Despite the economy’s ups and downs, the news continues to be filled with reports that businesses seeking to hire can’t find qualified workers.

So if you have qualified workers on board, how far should you go to retain them? When a key employee gets a job offer, should you consider making a counter offer?

Counter offers to employees who get job offers are becoming more common. In a recent study, one in five executives admit their companies have made more counter offers in the last six months. Nearly 40 percent say the main reason for making a counter offer is to hold onto employees with hard-to-find skills, while 27 percent they want to retain long-term employees who have knowledge of the company.

Although this study did not focus on small businesses, if big companies are making more counter offers, that’s spurring competition for you to do so as well. Below are some questions to ask yourself if you’re considering making counter offers.

Will it Work?

Counter offers do work in many situations. More than two-thirds of survey respondents say it’s common for employees to accept a counter offer.

However, if you feel that a counter offer is a last-ditch effort, it may not be one worth making. That’s because of the next point. . .

Will it Hurt Morale?

If you extend counter offers to one employee but not another, you could create a morale problem in the company. If an employee gets a counter offer and stays, others may resent him or her as a “favorite”—and you for showing favoritism.

So, think carefully about whether making a counter offer is worth the risk.

Is Money the Only Issue Here?

Money is still a huge motivator for many employees, and someone who’s otherwise happy with his or her job may reluctantly decide to leave if the salary isn’t high enough. But other concerns, such as a lack of advancement opportunities, are often related to salary issues. Though a raise can push these feelings under the rug for a while, they’ll ultimately pop up again.

Make sure you discuss the reasons for the job search with the person before making any decision.

Will the Person Leave Anyway?

Nearly three in 10 executives in the survey admit that if someone accepts a counter offer, they’d question that person’s loyalty ever after. And 21 percent say they’d worry that the person might still leave, due to other unresolved issues that prompted the job search in the first place.

Will You be Setting a Bad Precedent?

If word gets around that you made a counter offer – and it probably will – other employees may be prompted to job-search in hopes of spurring counter offers.

Will Your Payroll Get Out of Whack?

If you make a counter offer to one employee, will others with the same or similar job description now be at a disadvantage? Again, this can lead to morale problems if it comes out that one person’s salary is higher than that of people with comparable roles.

Keep in mind, 38 percent of companies in the survey have “no counteroffers” policies – so don’t fell compelled to offer one.

Only you can decide whether making counter offers is the right move for your company. Just be sure you think long and hard about this decision, because it can have lots of ramifications long after the employee is gone.

Employee Photo via Shutterstock

Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.